5 ways to help save on healthcare costs

Rising healthcare costs can seem out of control, but you can minimize them.

As medical expenses continue to eat up a large chunk of Americans' retirement savings, "planning ahead is vitally important," says Nicole Duritz, AARP's vice president for health education. "Health planning has to be part of your financial and retirement planning."

The exact amount each person will spend on medical expenses varies widely, but there are few things everyone can do. First, examine your options for healthcare coverage Then use these tips to help minimize other costs:

1. Pay less for medication.

Duritz recommends asking your doctor if there's a lower cost alternative to the medication you've been prescribed. That doesn't necessarily mean a generic; it could be an older, less expensive version of a current medicine. "The savings can be in hundreds to thousands of dollars per year," Duritz says.

The AARP has two online calculators — one for people with a Medicare Part D plan and a more general drug savings tool — that can help you find alternative prescription medications. You can even print out a letter from the site to take to your doctor.

2. Get a second opinion.

Don't hesitate to check with another provider if your doctor recommends an expensive course of treatment. You may have other, equally valid and less-expensive options. Even if you choose the more expensive treatment, educating yourself on the alternatives will increase your confidence in your decision.

3. Look into a Health Savings Account (HSA).

If it's available to you, you can fund an HSA with pre-tax dollars. Distributions that are used for medical expenses are tax-free. "These accounts can be helpful," says Duritz. "Just be sure that you know all the rules."

4. Explore long-term care insurance.

Nearly 70 percent of people will require some type of long-term care after the age of 65 — and it's expensive.[1] Full-time nursing home care, which is the most costly, averages between $74,800 to $83,600 per year.[2] Though long-term care insurance rates are increasing, a policy could keep you from depleting your savings in retirement to pay for your care.[3]

5. Take advantage of tax breaks.

Unreimbursed medical expenses are deductible if you itemize your deductions and the expenses exceed 7.5 percent of your adjusted gross income. Those expenses can include co-pays, the cost of transportation to and from medical offices and even weight-loss programs.[4]

"We want people to enjoy their retirement," Duritz says. "But to do so, they need to have the peace of mind that they've worked out a plan."

That includes planning for your healthcare costs — and hopefully cutting them down.

Need help?

Consider this: According to The Principal Financial Group, in 2010 the average retired household (age 65-74) spent 11.6 percent of their annual spending on health care.

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